Old, sold debt still payable in full

Sunday

Mar 1, 2009 at 12:01 AMMar 1, 2009 at 10:57 AM

Dear Debt Adviser: I just received a court docket number for an old credit-card debt. If I am correct, the account was closed in February 2003. The collection agency is suing me for $15,000, which is what I owed. Can they sue me for that amount? I thought they could only sue for the amount that they paid for the debt. I need some help and need to respond to the courthouse within 30 days.

Dear Debt Adviser: I just received a court docket number for an old credit-card debt. If I am correct, the account was closed in February 2003. The collection agency is suing me for $15,000, which is what I owed. Can they sue me for that amount? I thought they could only sue for the amount that they paid for the debt. I need some help and need to respond to the courthouse within 30 days.

-- Mike

Dear Mike: I'm amazed the suit is for only $15,000. They could add legal fees and interest on top. But to answer your question, yes, they can try to collect the original amount of the debt regardless of what they paid for it.

I strongly suggest that you communicate with the court and appear when you are scheduled. In the meantime, do some research to determine the statute of limitations in your state that pertains to your credit-card debt. If the time has expired to collect the debt, you can use that information in court.

From what you say, you seem to believe that the debt is yours and agree that you owe it. Still, I'd be sure they can show that the debt is valid and that they have the original paperwork showing you owe the debt. I have heard more than once that older debts often are sold without proper documentation proving the person is responsible.

Let's assume everything checks out. They have your John Hancock on an agreement or contract, and the debt is within the statute of limitations. You owe what you owe. The relationship between your original creditor and the collection agency has nothing to do with you.

Yes, it is quite likely that the collector bought your debt for pennies on the dollar. Collecting the full amount, or as close as they can get, is how collection companies that buy debt make money. The original contract with your creditor is still valid even after the account is closed and the debt is sold to a third party.

That said, if you can come up with the cash, the collection agency might take less than is owed on the account if you make a reasonable lump-sum offer. You will have better luck if you make an offer before they spend the money to go to court and before they know they can get a wage attachment.

Sixty percent or so is generally considered a reasonable offer to settle a debt with a collector. So I'd start lower and work up to that amount.